Swarajya, September 2, 1961
Between ourselves, honest voter, these private monopolies created by the pernicious system of permits, licences, quotas and controls (to be extended now even to foreign capital which voluntarily comes into the private sector) make the Congress Party's rich friends richer, and the poor poorer. It is a close conspiracy; we have a battle between money and liberty, between dharma and atheism, between freedom and communism clothed in Congress robes.
Where there is a fire and danger of its spreading, one raises the alarm and cries 'Fire', not once but several times. So also when a railway man sees danger of a collision, he waves the red flag, not once but repeatedly. Likewise, I write again and again about soaring prices and soaring taxes, resulting from industrialization sought to be completed within the period of a particular stewardship.
One hopes loyal congressmen will not ask for a ban on the Reserve Bank as they do in respect of communalism or on Punjabi Suba news. The Reserve Bank has been sounding alarms. Facts are useful to know, although they disclose our own errors. To clamp down on information is not the way to deal with them. Unwillingness to see is the most dangerous of all symptoms of misgovernment.
Sweeping axioms, howsoever cut and dried, cannot put out a fire. The Reserve Bank is understood to have drawn the attention of the Union Finance Minister to the poor response of the money market to the recent loans floated by the Government of India leading to a very heavy reliance on the Reserve Bank's own subscription to produce a "success'. When genuine savings are made impossible, how can the Government expect subscriptions to its loans? When you starve the goose, you can't expect the bird to lay its (golden) eggs.
Professor Parkinson is pleading for reduction of public expenditure in England and limitation of taxation to 20 per cent of the national income. As we go down in the scale of national income - and India is very low down - the allowable measure of taxation must be less and less.
The Reserve Bank's report on currency and finance for 1960-61 points out that altogether industrial production has risen by more than 12 per cent; paradoxically the index of wholesale prices also rose by 7.2 per cent. A total rise of 30 per cent in the wholesale prices during the Second Plan period is what we begin with at the start of the Third Plan with all its further consequences in the same direction admitted in legible printer's ink. The so-called Third Plan begins with the lowest level of foreign exchange reserves and a dangerously high level of prices. And it, as the planners have admitted, there is likelihood of a further steep rise, the situation cannot be coped with or covered by cliches and long speeches lulling people to sleep.
A clear admission is always useful, specially when it comes from the Minister for Planning. The report reads : "On the vexed question of prices. Mr. Nanda said that one of the reasons for the rise in prices during the Second Plan was that deficit financing had increased out of proportion." This is an answer to all the ignorant talk of Congress bosses at lower levels that the printing of notes at Nasik did not matter, and, indeed, that it was good for the poor people who got more money thereby.
It is unfortunately far too easy to bamboozle our people and steal their votes. But it is lucky that there is an honest man somewhere who, in spite of much muddle, retains his respect for truth. Deficit financing, which is another name for the printing of: currency to overbalance production and to obtain human labour: cheap, is at least 'one of the reasons’ for the rise in prices.
Now what did Mr. Nanda say next? He said that indirect taxation during the last ten years had been responsible for an annual increase of prices by half a per cent. The word 'annual' means a progressive half a per cent. How he was advised, and on what nice calculation, to reach this precise half a per cent will be a mystery. But that apart, it is clear the Government is making up for it by increased indirect taxation during the period of the 3rd, 4th, 5th, 6th, etc., plans.
It is either deficit financing or indirect taxation or both, and it is no comfort to the poor man that the operation shifts from one to the other according to the whim of the grand operator. The Plain report explicitly admits there will be a rise in prices but promises to keep it in check by physical controls and other methods.
There is an innocent belief that the Government at the Centre or those in the States can somehow 'check' prices and 'hold the price line', and appeals are made in the press for this being done at once. This physical holding of the price line is an illusion which, if allowed to prevail, will only lead to more black- marketing as well as high prices. Holding the price line is not a circus trick. It means reversing policies.
The Planning Commission believes in what it calls "institutional changes" to control prices, that is to say, in the transfer of the distribution business from private and individual hands to co-operative and State agencies. This would result in monopolies and plenty of mismanagement. The limited safeguard against undue exploitation which is inherent in the competition of the free market will be lost and there will be more black- marketing-witness the cement business, a scandal that everybody now knows but which is still unabated.
The payments position having become difficult, we have secured what may be deemed a concession that payments to some of our foreign creditors may be in Indian currency. Apart from the possibility of such rupees going to help subversion, it will certainly add to the inflation and the upward flight of prices.
All this is melancholy but one cannot help warning where warning needs to be given. To flatter or suppress truth in fear of something is not patriotism but the opposite of it, viz., treason.
